How many paid bidders to recruit
Question
You are selling gold at auction and will receive the second-highest bid. Each bidder's bid is independently uniform between and , and the auction house charges for every bidder it recruits. If you recruit the number of bidders that maximises your expected net proceeds, what is that expected net amount?
Short answer
(with bidders). The second-highest of uniform order statistics on sits on average at fraction of the range, i.e. dollars. Subtracting the fee, the net is maximised at : (versus about at and at ).
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Open the worked solutionLessons behind this question
- Continuous Random Variables and Probability Density Functions
- Expectation, Mean, and Variance
- Conditional Expectation and Variance Revisited
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